The SPE Foundation through member donations and a contribution from Offshore Europe

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1 Primary funding is provided by The SPE Foundation through member donations and a contribution from Offshore Europe The Society is grateful to those companies that allow their professionals to serve as lecturers Additional support provided by AIME Society of Petroleum Engineers Distinguished Lecturer Program 1

2 DRY HOLE ANALYSIS: What I have learnt about the upstream petroleum industry from my failures! Dr Steve Mackie Geosim Consulting Pty Ltd Society of Petroleum Engineers Distinguished Lecturer Program 1

3 Outline Fortescue (Gippsland Basin) Accounting Raven (Cooper Basin) SW Queensland (Cooper Basin) Kiana vs Western Flank Discovery (Cooper Basin) Windermere (Otway Basin) 2

4 Fortescue 3

5 Fortescue Ref: Thornton et al., The Fortescue Field New Oil in the Gippsland Basin, APPEA Journal Vol 20 Part pp

6 Fortescue Stratigraphic Separation Pool Separation Pressure Separation Geochemical Separation 5

7 Fortescue Learning: The upstream oil and gas industry is aimed at making money from rocks, fluids and ALL the available data it s a BUSINESS not academic research 6

8 Accounting Company had several major cost overruns whilst drilling exploration wells over the previous 10 years Head office sent out investigation team to do a review to determine why After 2 weeks of investigation they found that the majority of wells fell into two categories; on cost and over cost and recommended that we do more of what made up the on cost group Called all explorers together to determine the makeup of each category 7

9 Accounting The difference? On cost wells were all P&A d. Over cost wells were all discoveries! Reason: Accounting budgeted drilling exploration wells on a P&A basis. Any testing or completion was, therefore, over budget We suggested that instead of drilling only P&A wells that Accounting change their budgeting process! 8

10 Accounting Learning: Don t let accountants run the business! 9

11 Raven 10

12 Raven Ref: personal files of open file data 11

13 Beckler / Bow / CrowsNest Ref: personal files of open file data 12

14 Raven Beckler / Bow / CrowsNest Learning:... oil is first found... in the minds of men IDEAS! Wallace Pratt, 1952, Towards a philosophy of oil finding: Bulletin of the American Association of Petroleum Geologists, v. 36, no. 12, p

15 South West Queensland 14

16 South West Queensland 15

17 South West Queensland Learning: Political environment effects outcomes 16

18 Kiana versus Western Flank 17

19 Kiana versus Western Flank Western Flank Previous Kiana Discoveries Trend Undrilled Structures Ref: personal files of open file data 18

20 Kiana versus Western Flank Ref: personal files of open file data 19

21 Kiana versus Western Flank Learning: Management may not always know what is best trust your analysis 20

22 Windermere 21

23 Windermere A A A A Ref: Bass Strait Oil 2011 AGM (press release 16/11/2011) 22

24 Windermere Windermere-3 Windermere-1 Ref: PESA Vic/Tas Presentation (June 2012) 23

25 Windermere Learning: Not all dry holes are failures think of what new plays can be uncovered from them! 24

26 Summary What I have learnt from my mistakes: The upstream oil and gas industry is aimed at making money from rocks, fluids and ALL the available data it s a BUSINESS not academic research Don t let accountants run the business!... oil is first found... in the minds of men IDEAS Political environment effects outcomes Management may not always know what is best trust your analysis Not all dry holes are failures think of what can be uncovered from them! 25

27 Conclusion Whenever I have had a change in company the thing I miss the most is the interaction with the people People are what make the industry great! 26

28 Your Feedback is Important Enter your section in the DL Evaluation Contest by completing the evaluation form for this presentation Visit SPE.org/dl Society of Petroleum Engineers Distinguished Lecturer Program